We are in a crisis in the evolution of human society. It’s unique to both human and geologic history. It has never happened before and it can’t possibly happen again. Albert Bates, author of The Financial Collapse Survival Guide and Cookbook, brings you along on his personal journey.

Wednesday, October 29, 2008

The conference drew together high ranking officials from the United Nations, international NGOs, appropriate technology experts from the developing world, commercial pyrolysis companies, foresters, agronomists, soil scientists, and others from 31 countries. We learned that you can actually make coal, carry it to Newcastle, and bury it in the ground, reversing the cycle begun by carbon-based capitalism 500 years ago.

Professor Tim Flannery told the gathering that even if we shut down every coal plant and stop all emissions of greenhouse gases from industry worldwide, the dangerous warming of our planet would continue for centuries. “That is the point at which you realize that biochar is really, really important,” he said.

Flannery suggested that 8 percent of CO2 is currently going into terrestrial vegetation, but if we could double that, we could buy ourselves time to work on moving away from coal and oil. Flannery said that we have to be mindful of the historic debt incurred by the one billion people whose ancestors made the industrial revolution. “That carbon debt to the other 6 billion could be repaid at 5 percent per year with biochar,” he said.

Biochar production systems demonstrated at the conference turned up to half the carbon in biomass or waste product feedstocks into bio-energy — producer gas or wood vinegar — with the remainder captured as a dense, fine-grain, porous char.

This differs from other forms of biofuels in that the carbon is not returned to the atmosphere, either as carbon dioxide from burning, or as methane from decomposition. It is transformed into an inactive form that remains in the soil for thousands of years.

Mixed with compost and/or artificial fertilizer and applied as a soil amendment, biochar improves the tilth, water retention capacity, fertility, and carbon sequestration of degraded soils. Agricultural gains of 880% have been reported, according to Johannes Lehmann, soil scientist at Cornell and chair of IBI.

Scientific understanding of biochar began with the discovery of Terra Preta (“dark earth”) soils in Brazil in 1867. Subsequent surveys identified fertile islands of char-containing soils, corresponding to native settlements, dating back thousands of years, throughout the Amazon basin. At IBI-2 we learned that prehistoric Terra Preta has also been discovered in Australia and North America.

The carbon sequestration angle has brought the research effort greater urgency, and the International Biochar Initiative was formed to bring scientists, engineers, farmers, policymakers, funders and advocates into collaboration to speed studies, incentives and applications.

I’ll be blogging more about this in coming months, in part because we have been experimenting with biochar at the Institute for Appropriate Technology and are starting to get some interesting results, in part because skepticism is still warranted and biochar alone is not a solution for the existential threats we face, and also in part because we are engaged in a large-scale bamboo-to-biochar initiative that, if successful, will create the first permaculturally-designed biochar-based town -- 4500 completely carbon neutral homes near Chattanooga.

Mantria CEO Troy Wragg and his permaculture design team scout the best parts of a former Bowater pine plantation for places to plant the first bamboo groves. Photo by Albert Bates, Farm News Service

In a modern pyrolysis plant, 40% char yield is possible, with energy from the pyrolysis gases refluxed to burn cleanly and produce enough heat to drive the process, dry the feedstock and supply leftover power to a grid-intertie system. This makes about 4 or 5 bottom lines for biochar, and provides the first carbon negative power possibilities, including driving atmospheric carbon levels backwards to pre-Industrial Revolution levels on relatively short time frames. This is the basis of the process we have been advising on near Chattanooga, the small-scale kilns we are constructing at GVI, the subject of my workshop at the Ozark Area Community Conference 2 weeks ago and also one of my presentations at the financial permaculture course that concludes with a Farm tour later today.

What spurred me to pen my thoughts at this point was something Vandana Shiva said at a conference in Italy this past week. Real reform, she insisted, will happen when discussions move from the stratosphere to the soil, and when we find new, non-industrial ways of thinking.

The advantage that biochar offers is something similar to the advantage that fractal geometry conferred upon cell phone users a decade or more ago. The three dimensions of Euclidean space describe how most of us have been looking at the physical world for the past 2300 years. Einstein gave us a forth dimension, time, but it really only reinforced our “normal” way of relating to reality. It was still industrial thinking.

Mathematics has not been that static, and 4-dimensional, 5-dimensional, and even higher-dimensional spaces are now more than the stuff of shamanistic inquiry or surfer meditations. We have discovered fractal geometry in chaotic trajectories (strange attractors) and in natural systems (streambeds). It now seems possible that Euclid’s geometry was our limiting factor in understanding both why the polar ice and permafrost is disappearing as fast as it is and how to reverse the process.

Mandelbrot began his seminal treatise on fractal geometry by considering the question: "How long is the coast of Bretagne?" If you lay a ruler along a map of that coast, you get a rough approximation, but to get something more accurate, you have to use several smaller rulers, and as you do, the distance increases. Mandelbrot observed that eventually you will have to concede that if accuracy is your goal, the ruler gets diminishingly small, while the length of the coastline gets infinitely large. At some point even the concept of length becomes problematic.

Here are some graphical examples, all courtesy of Vanderbilt University. If you imagine the simplest ruler as the initiator, a next generation approximation of accuracy, called the generator, makes something mathematicians call the Koch curve.

The Koch curve takes each line and replaces it with four lines, each one-third the length of the original.

Do it again.

We do this iteratively ... without end.

A similar exercise is the Sierpinski Triangle. We start with an equilateral triangle, connect the mid-points of the three sides and remove the resulting inner triangle.

Iterating the first step we get:

The Sierpinski Triangle found its way to cell phones when engineers started experimenting with ways to shrink antenna size while not losing reception. They began with something that looked like a rat maze and before long had progressed into stacked pyramids.

Now they are imbedding fractal antennae into Kevlar helmets.

The advantage is not merely an increasing length for better reception, but the serendipitous discovery that frequency bandwidth is also improved, making many more channels possible. The helmet pattern demonstrates a very high gain antenna with a very small footprint.

Mandelbrot’s set is found by iteratingz n+1 = z n2 + c.where z is a complex number. z0=0. When you do this, it is infinitely complex -- and it looks like mold.

What all this has to do with biochar is in how the Terra preta soils actually work their magic. One gram of biochar has a surface area of 1000 square meters. The way it accomplishes this is through micropores, the crystalline-like surfaces formed, randomly and chaotically, during pyrolysis. Terra preta’s carbon sequestration process uses a fractal dimension.

In the soil, biochar’s cavities fill up with nutrient foodstocks for microbes, much like a kitchen pantry. The microbes move in, and pretty soon hyphae of fungi appear. The hyphae are a fast road for nutrients and moisture – a trade exchange route to plant and tree roots. Examination of biochar-amended soils a few months after treatment found that vigorous fungal colonization was common.

If you can imagine the char as providing a coral reef-like structure, full of tiny polyps and crevices, it attracts all manner of soil organisms to it. If the pantry is empty, then those microbes will go to work to stock it, which is why biochar denitrifies over-fertilized, burned out farmland and replaces it with slow-release fertility, and also why “charging” the char with compost or urine before applying it is a good idea. I’ve got a charging station on the balcony just outside my bedroom door.

Urine passes through a spiraling tube from the funnel receptacle on the balcony to the char bin at ground level. Photos by Albert Bates, Farm News Service.

Not all char is char, as the saying in the biochar community goes. Imperfectly pyrolyzed, the char contains “activated” charcoal, that steals oxygen from the soil and releases carbon to fungi, microbes and plant roots and eventually back to the atmosphere, either as carbon dioxide, monoxide or as methane. With more careful pyrolysis, the carbon is locked tight and never leaves the soil. Biochar making, therefore, is not the same as charcoal making, and part of the concern is that if done poorly, the biochar revolution could actually add to our climate crisis.

Done well, the carbon becomes soil structure. The compost in its pantry becomes worm and insect castings, to be taken up by the tertiary decomposers that convert it into plant food. The whole process is supercharged by the fractal geometry, resulting in the observed gains unexplainable by any other means.

All of which is to say, Vandana Shiva is definitely onto something here.

Thursday, October 23, 2008

With Barack Obama off the campaign long enough to kneel at the bedside of his grandmother in Hawaii, I feel the urge to take a moment and dive into US politics. I am a bit reluctant, because if I ever ran for office it would be on a slogan like “US out of North America.” Still, this race really has a lot at stake, so let’s have a look.

Superstitiously, I voted already, hoping like many to take at least one dirty trick out of the Republican quiver by not suffering the long lines and electronically transmitted machine commands on election day. Also, in the event my name had been put on a no-vote list, I might have a shot at overturning the mistake by fast court action and still having time to vote in this election.

Looking at the Electoral College map, Obama has 364 electors to McCain’s 171, with 18 too close to call. 270 are needed to win. Eight states that went for Bush in 2004 are now in the Democratic column and three more are barely holding on (including Tennessee) and could easily tilt into the Obama camp in any given news cycle. Even solidly Republican turf has been moving to Obama in the final days, fed up with McCain’s recklessless, fecklessness, and nastiness. Take Tennessee, Kentucky, and North Carolina, for instance, which look like divining rods crossing. Yesterday I paid $2.67/gallon for gas at a local station, a woolly caterpillar sign of how desperate someone is getting for Republican votes. Wish I could fill up my 500-gal. reserve tank now, but it is already full.

Following the money, Obama is setting fundraising records and able to outspend his opponent four to one. The cash meter is also tipping to Democratic favor for House and Senate races and it looks now that there will be 57% and 59% Democratic seats, respectively, possibly more.

A bigger question is why, when speaking of the election, I have to keep knocking wood.

While it is not inconceivable that Obama will issue an omnibus pardon to his predecessor, after the example of Gerald Ford to Richard Nixon, it is less likely that such a pardon would be extended to the inner circle of Bush’s Bunker.

Letting the puppet go free while unleashing the Justice Department on the puppetmasters has to be a nightmare scenario waking some in that circle up at night. Apart from buying condos in Dubai, where extradition won’t reach (unless one resorts to extraordinary rendition), they really have few options.

Of course, one option is just to remain in power.

Stephen Lendman points out that most of the elements of the October Surprise, 2008 Edition, are falling into place. The Dow Average dropped 22% over eight trading sessions and comparable crashes rippled through exchanges all over the world. The 1019 point swing from low to high in one of those sessions was the biggest since the Dow was created in 1896. $8.4 trillion, at a minimum, was washed out of retirement savings and company worth, bringing commerce and lending to a near standstill and beggaring some of the world’s largest corporations. At the same time 10 million foreclosures hit the real estate sector, job layoffs mounted, and consumer confidence nosedived.

While we have yet to see runs on banks or empty grocery store shelves, troops are being pre-positioned to quell anticipated riots. On October 1st, the 3rd Infantry's 1st Brigade Combat Team was returned from Iraq to serve in this role. Emergency plans for coping with economic collapse (?) or election reversal (?) a la Calderon are being fleshed out in FEMA offices and Pentagon contractor circles. Sy Hersh says he is keeping his mouth shut and his fingers crossed.

Wednesday, October 22, 2008

Yesterday one of the talking heads on the financial crisis opined that the recession is now inevitable, and it will not be as brief as previous ones, but “could continue for a few years.” That is an understatement. If there is a silver lining to the crisis, it is that it will delay peak oil’s drop trajectory by a few years. But make no mistake; this is the start of what James Howard Kunstler has dubbed The Long Emergency.

This past Monday, Mr. Kunstler, who generates metaphors faster than a tennis practice machine pumps balls, came up with a humdinger. He said the financial crisis is hitting us the way a tsunami does. “The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts cancelled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea.” But in his rapid-fire metaphorization, there is an opportunity missed. Yes, the October Surprise financial crisis is the withdrawal of the sea, but the coming wave is not monetary inflation, as Kunstler would have it, but Peak Oil. Whether we get inflation, deflation, or both, what is coming is a tidal wave that will wash a long distance inshore, leaving nothing we would recognize as today’s city life in its wake.

Separately and simultaneously, Richard Heinberg compares the crisis to the Great Depression, and says that the government’s response should be informed by what worked then. Heinberg proposes a “New Green Deal.” Instead of propping up failing financial institutions, the new president must inject investment into the real economy by supporting wide-ranging but tightly coordinated projects to create far more renewable energy generation capacity, build railroads and public transport facilities, insulate millions of homes while providing alternative heat sources, and re-configure the national food system to dramatically reduce and soon eliminate the need for fossil fuels.

I’ll take that a step farther and remind readers that Franklin Roosevelt was also a little slow to adjust to what was required in the way of social programs, but, led by his wife, Eleanor, eventually did the right thing. In 1943 Eleanor Roosevelt started the Victory Garden movement and, by 1945, 20 million home gardens were supplying 40 percent of the produce consumed in this country. She did it over the strenuous objections of the Department of Agriculture.

The Department of Agriculture also opposed organic gardening for decades, until the oil crises of the 1970s, when, after its own scientists showed how competitive it could be and how it could get the US off imported oil, it became an advocate, sort of. The Reagan Revolution ended that. The Republicans killed it with a total purge of the Department and buried the evidence. USDA was even forbidden to use the word “organic” and had to come up with “Sustainable Agriculture” as a euphemism.

Today, in New York and Boston, there are allotment gardens for people without access to land. Those in New York City were started by Brad Will when he was working for the Sixth Street Community Center, before he went off to die in Oaxaca. As Michael Pollen observed recently, Victory Gardens offer a way to enlist Americans, in body as well as mind, in the work of feeding themselves and changing the food system — something more ennobling than merely asking people to shop green.

Another New Deal program that seems lost to history but could be revived is the Resettlement Administration, a U.S. federal agency that, between April 1935 and December 1936, relocated struggling urban and rural families to communities planned and built by the federal government.

The Resettlement Administration was originally under the United States Department of Agriculture as the Division of Subsistence Homesteads. It was folded into the Farm Security Administration from 1937 until 1942.

The Resettlement Administration worked with nearly 200 communities, each of several hundred homes, to help residents escape poverty; show that cooperative management can work, and as an experiment in cooperative ownership of the village, including the businesses, which experimented with microlending, peer management review, and other innovative practices. It was killed by the Republicans during the McCarthy witch hunt.

The intentional communities movement in the US began mostly after WWII by pacifists and war resisters who picked up where the Resettlement Administration left off. Today there are several hundred thriving intentional communities in the USA and many more in other parts of the world. From intentional communities sprang ecovillages, a movement that has more than a million residents worldwide today. These were the fruit of that brief experimental period of the 1930s, the sketchpad for the route to higher ground as the tsunami approaches.

Tuesday, October 14, 2008

Which comes first, the election in 3 weeks or this gasoline price (seen here in Missouri this past Sunday afternoon)?

Missouri was seen as a swing state at the start of this Presidential election year and thus in need of campaign attention, while Tennessee was seen as solid Republican (it even swung away from native son Al Gore, who had sited his 2000 campaign headquarters in Nashville). Since the state was securely red, there has been no urgent need to push down gas prices to get more votes.

Now that Tennessee is up for grabs, we are beginning to see lower prices like other swing states. We have been slowly moving down from $4 towards $3/gallon over the past three weeks, prices that swing states like Missouri, Indiana and Ohio have been enjoying much longer. Hurricane-smuricane. As I mentioned in this space on September 6th, better prices at the pump are good news for the incumbent party, and if you have some sway with the refineries, you can make that happen, as we have seen in many Bush-related campaign seasons over the past 20 years.

If you have some sway with the oil producers and futures traders, you can also make that happen to crude, which puts the squeeze on countries like Venezuela and Russia, as an added bonus.

Of course, as James Howard Kunstler observes: "We construct our narratives to try and explain circumstances that are unraveling non-linearly before us, and some narratives are more plausible than others, depending on your vantage point. There are infinite narratives."

In my narrative, some gas is better than no gas, but if temporarily low prices bring us back to thinking the bubble economy we enjoyed before is real, and is not imploding now, we are worse off. We need to take this pause in the hyperinflation cycle to equip for the future, which will be a future not just of expensive gas, but of no gas. To the left is another sign I saw this past week in a central part of the Ozarks.

Back at The Farm we are celebrating the hunter's moon and preparing for our harvest moon. The persimmons are being dried or jellied. The hyacinths are coming off the constructed wetlands and going into long compost windrows to make next Spring's potting soil. A new, sawdust pyrolysising masonry stove is going into the Inn's greenhouse, along with all the tropical plants that will overwinter there. Carl is building a sauna from cedar shakes and scrapwood. Jason is laying out the project for our photovoltaic design and installation workshop next month. Ellie and Jessi are boxing up things we won't need when the workshop season is over. My mind is full of ideas for new books, and the extra time for writing that winter brings.

It is a good time to husband resources, buy durables, and secure for inclement weather.

Monday, October 13, 2008

On this coming Thursday night I will be one of the guests appearing with Catherine Austin Fitts on Coast to Coast AM radio. The subject is the financial crisis and we will be joined by community investment experts and sustainability entrepreneurs to talk about sustainable businesses, money cycling, local investments, and other ways people can join together to get through the economic storm and better prepare for the future.

During that immersion workshop, we will be going into the “invention room” for five days to develop business plans for a number of different businesses, including a green incubator and a small ethanol production business. There is a pretty amazing group of people coming to participate as both students and resident experts. The whole point of the exercise is to address how we build the financial bridges for transferring investment capital from global financial markets (which are staring into the abyss) to local investment (which is re-aligning to meet community and family needs more directly).

In this regard, I want to remind people of The Post-Petroleum Survival Guide, which could be retitled The Post-Financial Collapse Survival Guide now. The same 12-step program that is designed to end your addiction to oil also works to end your addiction to Wall Street ups and downs, conventional employment (one chapter is called "Quit Your Job") and dependence on government to save you when strange odors start emanating from your fan. I have set up a new link to handle the increase in orders for the book. I have now sold out of my author's supply, but if you order directly from New Society, I get a better royalty percentage than if you order from Amazon or another retail outlet.

If you are up at midnight next Thursday, I hope you will join us on the radio.

Tuesday, October 7, 2008

As the bleary-eyed soccer moms of suburbia prepared their children's school lunches this morning, out of the corner of one ear they could hear their local TV news reporting this quirky little tidbit from the US Presidential campaign. Maybe they heard the piece being read by Randy and Francis at News 7 in the Morning in Boston or Scott and Angela on the Fox 59 team in Indianapolis . It hardly matters. When this kind of truth leaks out through the local news cycle, it only means one thing -- the rusty grinding sound of a campaign unhinging.

The item? The guttersnipe, John McCain, who has been trying to draw links between his opponent and the weather underground from the 1960s, it turns out served in the 1980s on the board of the Council for World Freedom, a quasi-military front used by Oliver North and the Reagan White House to subvert the will of Congress when legislators cut off funds for the illegal covert effort to overthrow the government of Nicaragua after a democratic election threw out their puppet dictator. It wasn't enough that the despot Sen. McCain wanted re-installed was a torturer trained by the U.S. military, the Council for World Freedom was linked to former Nazi collaborators and ultra-right-wing death squads throughout Central America. Caught in the glaring crosshairs of public exposure, McCain claimed that he resigned from that board in 1984 or maybe 1986. But then retired Army Maj. Gen. John Singlaub and Joyce Downey, who oversaw the group's day-to-day activities, said they hadn't heard of that before. McCain's office produced two letters from 1984 and 1986 to back his account.

Anastasio ("Tachito") Somoza Debayle was a West Point graduate, head of the National Guard, and President of Nicaragua from 1967 to 1979. He used that authority to hunt down, torture and kill many political rivals. He was the last member of the Somoza family to be President, ending a brutal and corrupt dynasty that had held power since 1936.

Lest we have forgotten, or maybe were not even born then, the notorius Iran-Contra affair involved funding of a group of Nicaraguan terrorists, assembled and equiped by the White House, to reverse the democratic election and re-install the military dictatorship of the Somoza family. The effort was defunded and made explicly illegal by Congress through the Boland Amendment but that did not deter Ronald Reagan and the people around him. Reagan tasked his Vice-President, George Bush, Sr., former Director of Central Intelligence, with seeing that the effort continued covertly, out of the view of Congress.

The Iran-Contra affair was unmasked when a Lebanese newspaper reported that the U.S. sold arms to Iran through Israel in exchange for the release of hostages by Hezbollah (as later verified by letters sent by Oliver North to John Poindexter -- now Director of the supersecret Bush/Cheney Information Awareness Office, aka "Eagle Eye"). The Israeli ambassador to the U.S. revealed that the reason weapons were eventually sold directly to Iran was to establish links with elements of the military in that country, although suspicion arose that it was a payback for Henry Kissinger's secret Iranian mission that prevented Jimmy Carter from negotiating the release of U.S. Embassy hostages and thus brought about the election of Ronald Reagan.

The Contras did not receive all of their finances from arms sales, but used clandestine CIA drug trafficking to purchase and equip both Iran and Iraq. While a congressional inquiry led by John Kerry exposed the contra-cocaine connection, it neglected to investigate the much larger CIA-led poppy trade in Afghanistan, which was subsequently eradicated by the Taliban during the Clinton years, but then re-established and enlarged following the (ill-fated?) U.S. invasion of Afghanistan in 2002.

Not that we are saying John McCain has anything to do with that, mind you.

Monday, October 6, 2008

The Obama campaign, in an effort to combat increasingly negative attacks by the McCain camp, is launching an aggressive, multi-pronged effort to highlight McCain's involvement in the "Keating 5" savings-and-loan scandal. The campaign released a 30-second trailer yesterday for a 13-minute video that will be released at 12pm EST today on the new website: keatingeconomics.com.

Saturday, October 4, 2008

Last night I happened onto Bill Moyers’ NOW: 2008 Bailout Blues, and a discussion with Kathleen Hall Jamieson of the Palen-Biden debate. Jamieson made the point that we have now had each of the four candidates — Obama, McCain, Biden and Palen — asked what part of their election year proposals will need revision in light of the global financial crisis, and all four have essentially said, “None.”

KATHLEEN HALL JAMIESON: When Gwen Ifill reframed the question asked by Jim Lehrer in the first debate: What would you change in your plans, given current economic circumstances? Both candidates, like the heads of the ticket in the last debate, punted. You had Joe Biden saying, "Well, we were going to double foreign aid, but maybe we won't do that as quickly as possible. And we won't do all those bad things John McCain is proposing. Well, of course not. If you're elected, you're not going to react to the other person's agenda.

And Governor Palin basically said we're not going to change anything. So we've now had two debates in which candidates have been asked a significant question. And Jim Lehrer followed up repeatedly in the first debate. That in changed financial circumstances, with an unprecedented deficit and debt, with the public deficit foreign-held, now about to increase over the huge level that it's already at, these four candidates, two presidential, two vice-presidential, don't have the courage to tell us that if elected, they will change their spending and taxing plans.

Even though I believe that if either is elected, he will. As a result, they're campaigning in a way that makes it harder for them to govern responsibility. And they're ensuring that when elected, the electorate's going to feel betrayed by being promised things that they're not going to deliver. But if they keep their promises, they're going to be financially irresponsible and drive this country further into an economic mess.

Hard to imagine going further into an economic mess than we already are, but get ready, from here on out, it’s all downhill. I recently told a radio interviewer to think of it like an avalanche. You turn downhill and ski as fast as you can. What I meant was, get out of the stock market, secure your food supply, water supply, look after your neighbors, and prepare for the worst.

This past couple weeks, it seems like most people are doing exactly that.

On October 24-28, in our county seat of Hohenwald, Tennessee, we will bring together some of the pre-eminent post-apocalytic thinkers to begin work on a transition methodology we are calling Financial Permaculture.

If you happened to miss any of Catherine’s recent appearances on Coast-to-Coast AM, I strongly recommend shelling out the $6.50 for a month’s subscription and getting all the podcast downloads. Catherine was on for three solid hours on October 1st, another hour on September 15th, and you can find even more if you go back into the show’s archives.

Over the past year, thanks to a $50,000 USDA rural development grant that Global Village Institute and the Center for Holistic Ecology landed in 2007, we have been drawing together the threads of what “sustainability” might look like in the context of The Farm’s county seat, the old Swiss colony of Hohenwald (35.547 N, 87.551 W., pop. 3808, average violent crimes per year = 2).

Through a cautiously slow series of baby steps, we have gradually been sucking Transition Town Hohenwald into the viral meme of the emerging world made by hand. Our Local Economic Development and Green Education Initiative has been hosting public meetings, film screenings, presentations, and columns for the weekly newspaper. In July, we held an ecovillage design charrette with Diana Leafe Christian and Greg Ramsey to allow citizens the chance to re-envision what Hohenwald might look like if the giant tractor-trailer rigs filled with pine logs and appliances didn’t drive through the center of town every daylight hour and those barren and decaying storefronts, their business lost to the big box stores on either end of town, were back to selling groceries and hardware to pedestrian and bicycling walk-ins.

But lets stop a moment and consider the current financial firestorm. Step for a moment with me into the WayBack Machine and journey to those thrilling days of yesteryear, which seem so much like déjà vu all over again. I was in my 30s and arguing atomic veterans cases. Ronald Reagan was tearing the photovoltaic cells off the White House roof, launching Star Wars, and killing Jimmy Carter’s plan for energy independence.

The U.S. Savings and Loan crisis of the 1980s came from the failure of 747 savings and loan associations (S&Ls) in the United States, losing around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. taxpayer ($326 billion in 2008 dollars). The scandal was prompted by the activities of one particular bank, Lincoln Savings and Loan Association of Irvine, California, headed by Charles Keating, who ultimately served five years in prison.

John McCain and Charles Keating had become personal friends following their initial contacts in 1981. Between 1982 and 1987, McCain received $112,000 in political contributions from Keating and his associates. In addition, McCain's wife, Cindy, and her father Jim Hensley had invested $359,100 in a Keating shopping center. McCain, his family, and their baby-sitter had made nine trips at Keating's expense, often using Keating's jet, to Keating's opulent Bahamas retreat.

The “Keating Five” affair began when it was learned Keating made $1.3 million in political payoffs to five U.S. Senators, McCain included, in exchange for helping deflect regulators from Lincoln Savings. The regulators backed off, with disastrous consequences.

With the regulators off its back, Lincoln moved FDIC-insured accounts into commercial real estate ventures. By the end of 1986, the Federal Home Loan Bank Board had found that Lincoln had $135 million in unreported losses and had surpassed the regulated direct investments limit by $600 million. Undaunted, Keating appealed to President Reagan to make a recess appointment of a Keating ally, Atlanta real estate developer Lee H. Henkel Jr., to an open seat on the FHLBB, and that quelled the investigation for a while, until Henkel himself was caught up in the scandal and forced to resign.

In March 1987, with the investigation heating up, Keating and Senator Dennis DeConcini asked McCain to travel to San Francisco to meet with regulators regarding Lincoln Savings, but McCain refused. Keating called McCain a "wimp" behind his back, and on March 24, Keating and McCain had a heated, contentious meeting. After that they apparently kissed and made up, because on April 9 McCain attended a meeting with FHLBB regulators to discuss the government's investigation of Lincoln. The regulators felt that the meeting was very unusual and that they were being pressured by McCain and the other four Senators, and in May issued a report recommending that Lincoln be seized by the government due to unsound lending practices.

Because of Keating’s friends in high places, it took two years to close Lincoln down. More than 21,000 mostly elderly investors lost their life savings, about $285 million. The federal government was liable for $2 billion to cover Lincoln's losses when it seized the institution. A Senate Ethics Committee investigation criticized McCain for exercising "poor judgment." Time Magazine noted that the Committee had timed its report to coincide with the run-up to the Gulf War, minimizing its news impact.

In 1989, Catherine Austin Fitts was serving as Assistant Secretary of Housing. The housing bubble of the 1980’s had burst, and foreclosures were rising. John McCain had been caught with his hand in the S&L bribe till. The mortgage insurance funds of the Federal Housing Administration (FHA) were experiencing dramatic losses. HUD was losing $11 million a year in its single-family fund. All funds had lost $2 billion in the southwest region the year before. Fitts complained to her superiors that there was a lot of hanky-panky, but I’ll let you read that part of the story on her website.

As she looked into it more deeply, Catherine had a minor revelation. It you take away the Reagan/McCain lax regulation and fraud part, the single biggest cause of losses in the FHA portfolio was a falling Popsicle Index – an index Catherine and her staff coined to express the health of the living equity within a place.

The Popsicle Index is the percent of people who believe that a child can leave their home, go to the nearest place to buy a popsicle, and come home alone safely. It’s an expression of the sense of intimacy and well being in a place.

— Catherine Austin Fitts

Catherine says, “Not surprisingly, there is a correlation between the financial equity or wealth in a place and the living equity or human and natural wealth. Where the people, living things and land are happy, businesses thrive, and the value of real estate is good.

“It took many years of researching to realize what was going on in our financial systems to incentivize this behavior. In most areas of the world, places are organized by government and financed with debt.

“Corporations are financed with both debt and equity. The key financial opportunity is in owning the equity. When profits increase or the perception of a company prospects improve, the stock goes up. Senior management and investors sell the shares, generating capital gains. Capital gains on stocks and real estate are primary mechanisms for creating financial wealth in our society.

“As a result, corporations can make money exploiting people and places and their stock will go up. The ‘stock’ of the place harmed will not go down; there is no ‘stock’ of the place. By centralizing our investment capital into large corporations, our financial interests are not aligned with the interests of the people and our natural environment.

“So what do we do? If we are to stop the financial drain on our families and communities we must change how we manage our own finances. Perhaps the way to begin is as permaculture teaches us – to listen and build out from natural systems which are, ultimately, the source of most of our wealth.

“In every place, there are thousands of existing financial agreements, including laws and regulations that impact financial values. If we are to nurture and restore places, we are well served to listen to both natural systems and existing financial agreements, looking for ways of building new, fundamental alignments between land, people and their savings that reduce risk and optimize resources on an integrated basis.”

* * *

“Developing ways of creating sound investments to finance permaculture developments and the businesses that supply them would serve to spread the adoption of permaculture techniques. The more opportunities locally, or through decentralized networks, the easier it will be for people to withdraw their retirement savings from destructive systems.”

The idea of using the term Financial Permaculture to describe these efforts was coined by Thomas Hupp of the Leadership School as he, Jennifer Dauksha-English of the Center for Holistic Ecology, Greg Landua of the Ecovillage Training Center, Carolyn Betts of Solari and Catherine were brainstorming how to integrate the Solari investment strategy with the economic revitalization of Hohenwald.

Then they decided the best way to create an integrated vision of natural and financial health within a place was to invite many more people into the conversation.

For the past several months this group has been holding a series of public events in Hohenwald, getting gradually more specific, and, through that process, has teased out a few areas that most of the stakeholders can agree on. By “stakeholders” I mean county and city officials, private enterprise leaders, State agency representatives, and interested citizens of all backgrounds and predispositions.

From October 24-28, we will gather with participants and experts from across the country for a five day course and simulation — Financial Permaculture: The Greening of a Rural American Community. We will look at creating a new business such as alternative energy and fuel production. We will apply permaculture design to regional economic planning. Please join us. This is not intended just for Lewis County, Tennessee.

In her most recent Coast to Coast appearance, Catherine told George Noory that the $700 billion bailout bill was sending money in exactly the wrong direction. It was moving it from the real economy — people’s homes, small business enterprises, groceries, dental care and car loans — to the phony economy of pyramid schemes, fractional reserve debt finance, and loan derivatives. It was buying a pig in a poke — toxic paper — and it was using real peoples’ real life savings to do it. The antidote, Catherine said, was to reverse the flow. Run money out of the fake economy and into the real one; put it where it counts by making it easier to shelter your family, buy food, and get to and from work. Invest locally if you want to see your local economy thrive and the Popsicle Index rise.

The bailout bill may slow down the crash of global financial institutions, or it may not. What is certain is that people will still be around afterwards, and they will still have the same needs to be met. It is not enough just to outrun the avalanche. Once you get to safety, you have to start rebuilding. That starts closest to home.

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The Great Change is published whenever the spirit moves me. Writings on this site are purely the opinion of Albert Bates and are subject to a Creative Commons Attribution Non-Commercial Share-Alike 3.0 "unported" copyright. People are free to share (i.e, to copy, distribute and transmit this work) and to build upon and adapt this work – under the following conditions of attribution, n on-commercial use, and share alike: Attribution (BY): You must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work). Non-Commercial (NC): You may not use this work for commercial purposes. Share Alike (SA): If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. Nothing in this license is intended to reduce, limit, or restrict any rights arising from fair use or other limitations on the exclusive rights of the copyright owner under copyright law or other applicable laws. Therefore, the content ofthis publication may be quoted or cited as per fair use rights. Any of the conditions of this license can be waived if you get permission from the copyright holder (i.e., the Author). Where the work or any of its elements is in the public domain under applicable law, that status is in no way affected by the license. For the complete Creative Commons legal code affecting this publication, see here. Writings on this site do not constitute legal or financial advice, and do not reflect the views of any other firm, employer, or organization. Information on this site is not classified and is not otherwise subject to confidentiality or non-disclosure.

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